A town built on cars tries to retool
There’s little question this is a company town.
The 15-story Chrysler world headquarters is the tallest building for miles, towering over a 486-acre corporate campus on the western edge of the city. Police cruise in Dodge Chargers developed with the automaker. The city manager drives one too, and his wife gets around in a Dodge minivan. City Hall is a converted country estate built by John Dodge’s daughter.
At night, fewer than 20,000 people go to bed here, but during the day, when Chrysler is at work, the population soars to nearly 60,000. Last fall, when Chrysler was rumored to be in merger talks with General Motors, panicked city officials issued a news release to calm public nerves.
With good reason: When Chrysler shuts down, so do local businesses. After all, nearly all their customers work at the automaker.
This month, Chrysler was on mandatory furlough as the suffering company tried to cut costs and production on the heels of receiving $4 billion in emergency government loans.
The Dilly Deli, desperate for business, kept its doors open during the monthlong furlough. At lunch on a recent Friday, a lone customer nibbled on a tuna sandwich. In the town center, many retail spaces are vacant; those that are open have few if any customers.
“Yeah, we’re pretty dependent on that one company,” said Tom Alter, an executive at a local credit union. “But look around. I think it’s inevitable that Chrysler is going to play a much smaller role around here. We’ve got to get out of the auto business.”
Auburn Hills, like most towns in Michigan’s Oakland County, was built on cars.
Housing the offices and factories of automakers and the myriad suppliers who make components for them, this region grew rich off the assembly lines of Henry Ford, Alfred P. Sloan and Walter P. Chrysler.
Even today, the county is the nation’s fourth wealthiest, home to some of the nation’s toniest suburbs and towns like Bloomfield Hills, where auto executives in palatial mansions have driven the median household income to nearly $200,000 a year.
The top employer in the county is General Motors Corp.; Chrysler is No. 3. In Auburn Hills, 7 of the top 10 employers are in the automotive industry. Chrysler leads the way with more than 10,000 workers at its headquarters. The company contributes $1 of every $7 the city collects in property tax, about $4 million annually.
But with the auto industry in deep trouble, unemployment is rising rapidly, and property values are crashing.
Last year, for the first time in memory, tax collections declined here, said Auburn Hills City Manager Peter Auger. That’s in big part because of reassessments of the Chrysler headquarters (requested by the carmaker) that have lowered its value by $160 million in the last two years.
The city’s $66-million budget this year is down 18%, and Auger has ceased filling empty jobs. A recent report suggested that if Chrysler were to go out of business, the office vacancy rate here would shoot overnight to 62% from just 3%.
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It’s a familiar story, played out in the slow death of steel-mill towns, logging towns and shipbuilding towns across the nation. But local officials believe that Auburn Hills is different, that it can somehow erase the Chrysler Pentastar inscribed in its DNA and reinvent itself.
“I’d like to position ourselves to help lead Michigan out of the recession,” Auger said. “We can survive this.”
The key, officials say, is to wean Auburn Hills from the automobile, luring new types of business to this suburb, a half-hour’s drive north of Detroit and perhaps best known as home to the Detroit Pistons basketball arena.
Trumpeting incentive packages, skill retraining programs, business incubators and the fact that it has no municipal corporate or income tax, Auburn Hills wants to bring in financial services, healthcare and high-tech companies to foster start-ups and encourage expansion of educational institutions.
“Since the second World War, we’ve been pretty comfortable having all our eggs in just one basket,” said L. Brooks Patterson, Oakland County’s longtime executive, holding up a list of 10 new industries to focus on for growth. “We’ve got to diversify.”
Next year Auburn Hills will take a big step in that direction, when Oakland University and Beaumont Hospital open a medical school in town. It’s a project that will cost $100 million over 10 years, but when it’s finished, it will bring about $1 billion to the local economy every year.
The goal is to make Auburn Hills and the surrounding area a destination for top-tier medical care in the mold of Minnesota’s Mayo Clinic or the Cleveland Clinic. Patterson calls the project a “medical Main Street” and says it could create 45,000 jobs countywide in the next decade.
“This will bring pharmaceutical companies, biotech, new housing, new residents,” said Virinder Moudgil, who as senior vice president for academic affairs and provost at Oakland University oversees the medical school. “The impact is tremendous.”
Auburn Hills’ business-friendly policies have already lured companies such as Digital Dialogue, a call center that hired 120 people last year and expects to hire 200 more in 2009, and Lowe’s Cos., which will open a store here in the fall that is expected to create 175 jobs.
Projects like this can’t come soon enough for the people who live and work in Auburn Hills.
Dawn Hammock, 38, serves hot roast beef sandwiches drowned in gravy at the Country Kitchen, a half-century-old diner. She bites her lip with worry.
Three years ago she moved to the area from her native Florida with her family and found work as a waitress in the center of Auburn Hills. With the car industry on better footing, she was happy, she said, earning decent money while her husband worked as a machinist. “I enjoy the seasons, real weather,” she said.
With Chrysler on the ropes in the face of miserable car sales this past summer, business in town fell off sharply. Hammock left her first job to work at the Country Kitchen, just off Interstate 75 on the edge of town. She figured she’d do better here because it’s favored by truckers rather than Chrysler workers.
But these days everything is slow. Tips are off 25% and a month ago her husband got laid off. Now he’s considering moving to South Carolina to look for work, but Hammock says she’ll be forced to stay behind because she’s tied here by her granddaughter, born last year.
“It’s depressing, nerve-racking and stressful,” she said. “I don’t really know what to do.”
That trapped feeling is all too common in these parts.
In April, Volkswagen closed its U.S. headquarters in Auburn Hills, moving 1,500 jobs to northern Virginia. But some could not make the move. They joined thousands laid off from Chrysler, parts maker BorgWarner Inc., auto interiors specialist Faurecia and other companies. Many can’t leave the region because property values have plummeted so much that they’re unable to sell their homes.
According to county records, sales of homes in the area worth more than $400,000 fell by nearly a third last year, while inventories piled up, increasing as much as 75%.
“These people are really in a quandary,” said Kent Snyder, a local financial planner and former treasurer of the Auburn Hills Chamber of Commerce.
Lately, Snyder spends his days helping laid-off workers buy health insurance, borrow from their retirement plans and figure out what to do next. “Obviously, anyone who works in the auto industry is scared for their future,” he said. “But even the guy working in retail is worried because when the auto companies are in trouble, it trickles down.”
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Still, some refugees from the Big Three are finding ways out. For years, KimJohn Quinn and Thom Staudacher worked at GM and its lending arm, GMAC, but they ultimately left the carmakers in search of better opportunities.
Together they founded a business software company, Ajlsoft Inc., and looked for help from state agencies to grow the firm. They found support from an incubation program at Oakland University, and after looking at a range of locations, they settled on Auburn Hills.
Their offices are in a nondescript building, above a huge photo studio specializing in portraits of concept cars from the likes of General Motors. But the two say they’ve avoided pursuing business in the auto sector; instead, they count H&R; Block and American Express Co. among their clients.
“This area is beginning to build what it needs to grow in different directions,” Quinn said. “We’re like a phoenix in the ashes.”
On a cold January afternoon, with storm clouds blotting out the sky, City Manager Auger, a local who used to serve in the Auburn Hills police force, summons up his cheerleading spirit.
He ticks off the city’s finer points: its three commercial districts, its well-manicured golf course, projects to improve the roads, and Great Lakes Crossing (one of the largest malls in the region).
Even now, the city is working on a downtown revitalization program designed to lure new kinds of retailers and restaurants to the quiet main-street district on Auburn Road, a mile away from Chrysler’s headquarters.
The company at the town’s beating heart is seemingly in worse shape every day. A deal announced this week to give Italian carmaker Fiat a 35% stake in the company provided a ray of hope for Chrysler, yet industry analysts still predict its demise, pointing to the fact that its sales fell 30% in 2008 and that it won’t introduce a single new vehicle this year.
Last fall, Auger joined other Michigan officials in asking for as much as $100 million in federal aid for cities that lose major auto industry facilities. Some experts have told him that the Chrysler campus could be converted into a giant shopping mall.
Still, Auger can’t seem to concede that the end is near.
Perhaps it’s because even in this long, cold economic winter, the city isn’t quite ready to come out from under the car company’s considerable shadow.
“There are people who want Chrysler to fail,” Auger said. “But I still want them to succeed.”
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